The Truth About Mortgage Loans
Mortgage loans are evil. High interest and you risk losing something that you worked so very hard for. And represents another bill that you’ll have to contend with, but a mortgage loan can help you with paying off other nagging debt, getting much needed repairs to your home to increase its value or help you take that long needed vacation. But what if you could pay that off sooner than usual?
Imagine a 30 year mortgage, fixed, for $100k. The interest rate is stapled to your forehead at 7%. After half a decade you decide to move and after five years you’ll still owe 94% of the original debt. What a bummer.
The interest rate at the bottom of your loan papers is never as good as you think it is and certainly never as good as it could be. Your payment to them every month is usually fairly sizeable. Out of all that money though, how much is actually taken off of your overall debt and how much of that is all interest? In most cases the overall debt is 3X the actual amount of your loan. So a 100k loan over 30 years is actually 300k. One third of that is interest. Depressing isn’t it? That’s money that is going elsewhere. It should be working for you but, instead, it’s kicking you in the face. No one wants to 30 years of hard work just so someone else gets paid. We do that already, it’s called taxes.
What is the answer? Learn how money works! No one deserves to work for 30 years to only pay off 6k of your mortgage. At that rate it will take 25 years to reach 50%. Don’t ever pay a mortgage to keep a supposed tax shelter. You’re only paying $1 for 28 cents in deduction. It’s also not wise to hang on to the mortgage note under the guide of investments.
The solution is to pay more on your mortgage than you usually do, as much as you could afford. If you’re payment is $500 a month pay $700. One payment extra a year will take away roughly 8 years off of a 30 year note. Find out where you wish to be in 5 or 10 years and plan for that.
If you’re currently working on a plan to become debt free then use your mortgage for you. If you can afford to pay more than your normal payment on your mortgage, even if just once a year, it will be paid off faster. Getting a mortgage loan in the first place can pay off your other nagging debts like credit cards and car. If your only debt is the mortgage you can assuredly soak in an extra $200 a month or every other month. Imagine paying off your 30 year note in a third of the time? It looks good, doesn’t it?